The most important ‘generation’

When you think of generations, most people’s minds go right to baby boomers or millennials or some other demographic idea.

But today I want to talk to you about telecom generations and 5G, or the fifth generation of wireless broadband.

If you’ve heard about these generational shifts, it’s only because telecom companies like to saturate the airwaves with ads when a new “G” is rolled out.

The problem is, some of the language gets a bit generalized. For example, 4G and 4G LTE are two different speeds, but many times get lumped together in commercials for mobile phone companies.

And because the distinction is too complicated to explain, most people assume it’s all the same. Which it isn’t.

So, for your next cocktail party or golf outing, here’s the scoop (and it will come in handy later in this piece as well).

4G HSPA (High Speed Packet Access) networks have download speeds that run about 3-8 megabits per second. 4G LTE (Long-Term Evolution) clocks in at 5-12 megabits per second, or basically 50 percent faster than 4G HSPA.

The next generation, 5G, is starting to get built out right now and will be broadly available by 2020, will be at least 1,000 times faster than 4G LTE.

That is an enormous difference that will change the world of mobile that we live in. At those speeds, artificial intelligence in moving objects becomes possible. By that I mean driverless cars; drones will be able to provide real-time video and mapping data and you’ll be able to watch video replays from 360 degrees. Supermodel Karli Kloss was at the Oscars shooting “selfies” in this new format, which shows you that the tech is developed, it’s simply about deploying it.

It also means that the Internet of Things (aka, IoT) will become much more functional. IoT is the interconnectedness of objects to one another and to us via sensors.

For example, sensors in your car can see a problem occurring with your water pump, so it alerts the repair shop to the problem, the shop checks its inventory and then sets up an appointment for the repair (prioritizing the problem with other cars needing service) and emails you the appointment time (which is built around your preferences).

This is just one example. It basically enables our current “dumb” devices to interconnect and become a “smart” collective.

And 5G is the technological tipping point.

There are so many implications here and there are opportunities to grab some of the wealth being produced by the profound growth and disruption. It’s tempting to look to the leading edge firms that are doing remarkable work but stick to the strong companies that will certainly dominate this space as it grows and matures.

Because what you need to remember in all this is that for any firm to get a real leg up in this kind of shift, it has to be able to produce large quantities of 5G friendly products that are “5 9s” reliable (99.999 percent). Most smaller operations have a great deal of trouble achieving both these requirements.

For example, German car makers have joined forces with Huawei, Ericsson, Intel, Nokia and Qualcomm to establish the 5G Automotive Association. These are the kind of companies that will build out 5G and will also be there to reap the rewards.

More of these strategic partnerships will be developed, but as an individual investor, this may be the time to take a stake in a couple of these big firms while they’re not trading at a 5G premium. Once the hype hits, you could be spending far more than you want to get in on this shift.

For example Nvidia, the top play in visual computing, has sold off in recent quarters because its traditional business is undergoing transition or it’s been wildly overvalued, or both.

But the fact is, Nvidia (along with two other innovators that you can find out all about here) is already way ahead of the implications of the 5G revolution.

— GS Early

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GS Early